The Consumer Financial Protection Bureau (CFPB) finalized a rule yesterday aimed at providing the public and regulators with meaningful information concerning the lending practices of financial institutions.
The rule updates the reporting requirements under the Home Mortgage Disclosure Act (HMDA), typically known as Regulation C, which requires lenders to report information about home loan applications, loans originated, and loans purchased.
HMDA, which has been in effect for 40 years, solicits data to be used as a resource for both the public and regulators so that they can analyze a variety of concepts, including understanding fair lending issues.
"The Home Mortgage Disclosure Act helps financial regulators, the public, housing officials, and even the industry itself keep a watchful eye on emerging trends and problem areas in the nation's mortgage market," said CFPB Director Richard Cordray.
The HMDA effective date for most of the new provisions is January 1, 2018, and lenders are expected to report this information by March 1, 2019.
From its inception, the CFPB has stated that it is a data-driven agency. The final rule revises the data that financial institutions are required to provide in order to improve the quality of information relating to the mortgage lending industry.
Specifically, the final rule requires that mortgage lenders report information about all applications and mortgage loans, including reverse mortgages and open-end lines of credit. In a victory for the industry, pre-approval requests for the same loans will not be covered transactions under the HMDA rule.
It is not surprising that the CFPB included reverse mortgages under HMDA, given that companies that provide reverse mortgages have been investigated by the CFPB for predatory practices aimed at seniors.
The final rule provides that "data about all reverse mortgages will be essential in the coming years as the country's population ages and older consumers, many of whom are cash-poor but own their homes outright, may increasingly use home equity for living expenses and other purposes."
In providing comments about the proposed rule, industry experts cautioned that reverse mortgage reporting would create additional compliance management burdens on financial institutions given the already existing regulatory demands and uncertainties regarding reverse mortgages in the marketplace.
The CFPB counters that requiring the reporting of all reverse mortgages will aid private investment in the mortgage lending sector.
View the CFPB final rule.
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